Once-mighty German Steel Industry Ailing

From the Wilhelm Heinrich Bridge over the Saar in downtown Saarbruecken, follow the river to the west and you can see in the distance, shrouded in the haze, the tip of the steel works of Voelklingen.

Smoke belches from the chimneys. Steam pours from rolling mills and steel converters.

It is the fire dance of production, played out at the main plant of the Saarland's No. 1 steel company, Arbed Saarstahl GmbH.

You could be looking at the skyline of South Bethlehem.

The appearance of power and productivity is deceiving. The steel industry in the Saarland, elsewhere in the Federal Republic of Germany and in all Europe is taking it hard on the chin.

Overcapacity, declining consumption by major industries and foreign competition have spread unemployment and sucked away profits like flames eating up paper.

From 1979 to 1983, crude steel production in West Germany fell 25 percent. In what appeared to be a general economic recovery, it rose to 26.2 million tons in the first eight months of 1984, from 23.2 million tons in the 1983 period. But profits were still depressed.

Says Ed Talshoff of the American Iron and Steel Institute in Washington, D.C., "The German economic miracle is over. Now they have all sorts of problems, and one of them is steel.

"We know there's an enormous overcapacity of . . . steel in Europe, and the number of employment opportunities in Germany is nowhere near what it was 10 years ago.

The Common Market, or European Economic Community, which is composed of 10 countries including the Federal Republic, is trying to cut steelmaking capacity because of heavy losses.

The German government in Bonn favors mergers.

And German steelmakers are trying to cope through link-ups with others that they feel will streamline operations by shedding older, less efficient mills and allowing bulk purchases of raw materials.

Two of the country's largest steel companies - Klockner-Werke A.G. and Friedrich Krupp GmbH - recently found it expedient to merge their steelmaking activities, forming Europe's second-largest privately owned steel company after West Germany's Thyssen, which produced 11 million tons in 1983.

In the Saarland, promoters of the steel industry argue it has a future there if the European market is "stabilized," that is, if there's an even- handed approach to government subsidies.

But as matters stand, they say, there is no competition among steel companies in European countries over the quality of their products; rather, the competition is among the taxpayers whose governments use subsidies to buttress the steelmakers.

West Germans, miffed at what they believe is overuse of subsidization by their neighbors, claim their mills depend relatively little on government aid.

Meanwhile, in trade with the United States, German steel blues haven't been alleviated.

Writing on the topic in the November/December issue of Europe, the magazine of the European Economic Community, were Andrew S. Markovits of Boston University, a research associate at the Center for European Studies at Harvard University, and Karen E. Donfried, who is doing postgraduate work at the University of Munich.

"Concomitant with the political difficulties of the 1970s," the academicians wrote, "there also developed economic rivalries between the United States and the Federal Republic, both of which have been trying to improve their crisis-ridden economies, and often at what was perceived as being at the expense of the other.

"Thus, Germans have not been particularly thrilled by repeated American attempts to curtail the import of steel into the United States, just as Americans have continuously found it difficult to accept the rigid terms of the European Community's Common Agricultural Policy."

Though it is troubled, the German steel industry takes good care of its workers, who are highly organized and well-protected by the country's elaborate social security net.

A steel-mill employee takes home about 3,000 marks a month (around $1,000), which is considered very good pay.

Like his colleagues, he belongs to a union, the most important being I.G. Metall, the metal workers' division of the DGB-Gewerkshaft.

I.G. Metall, which represents the metal workers in the Saarland, called a strike last summer that closed most of the Federal Republic's automobile plants for a month.

The union exerts a lot of influence on the direction steel mills take because its members help decide how they are run.

Union employees make up half of a company's board of directors. At Arbed Saarstahl, for example, the board has 10 employee representatives, 10 company representatives and a neutral director to cast the deciding vote in the event of a tie.

German steel workers have been spared major layoffs. Instead the companies decided their employees would be "retired" automatically at the age of 50.